The head of investments of the French group Amundi: What is the possible development of the war in Ukraine?

At the end of February, the Russian Federation started the war by attacking Ukraine. Although the Russian regime cannot yet celebrate its successes, on the contrary, it managed to unite almost the entire world, which unequivocally condemned the current invasion. Likewise, Western countries have come up with a series of effective sanctions to damage their economy. But how will the situation continue to develop? The respected head of investments of the French group Amundi, Vincent Mortier, commented on this, according to which the whole thing will have its end. He specifically expressed these predictions.

Results within weeks or months

An acceptable way out of the crisis for Putin (remember Cuba in 1962?) - Successful negotiations between Ukraine and Russia and/or suspension of sanctions  

Economic consequences

• Central banks will revert to their usual rhetoric, growth will slow in Europe and there is a risk of recession (given the current problems and mistakes in the ECB's rate hike and tapering policy)
• Commodity exporters from the US and LATAM countries and China will be the preferred asset classes

Financial markets

• Defense and cyber defense stocks on the rise
• Shares of IT companies can also benefit from the crisis
• Energy prices remain high until there is structural diversification of suppliers (a matter of several years)

Russia will win: the end of the Zelensky regime, a new government

Economic consequences

• Ukraine will open the door for Russia to further advance into Europe, mainly to the Baltic states and Poland
• Civil war in Russia/Ukraine with high loss of life
• Russia Tests NATO with Cyber ​​Attacks or Retaliation, NATO Will Respond, Russia Crosses Red Line
• China will want to show its position in the new world order
  —> Other conflicts may arise

Financial markets

• High energy prices
• Market volatility (markets will react to the fact that Russia may cross the next red line) - earnings reduction as a real risk (Europe)
• Finding safe investments, selling liquid assets (equity and loans)
• The weakening of the euro

Civil war, siege of Kiev, high death toll (similar to Chechnya)  

Economic consequences

• Massacre in Kiev and other cities; the high number of victims is unacceptable for Russian citizens
• This would probably mean direct armed confrontation with the West (but not nuclear escalation)

Financial markets

• Stock market capitulation and panic selling

Russia will lose: Putin's regime threatened by strong opposition

• worsening domestic authoritarian repression, there will be social unrest or civil war in Russia

Economic consequences

• Russia will enter an economic recession and financial crisis with limited global spillover if the new Russia becomes a "Western satellite"

Financial markets

• The sell-off in the markets, the so-called fragmented world, can record American and Asian assets, possibly even European ones, if there is no deep recession

Nuclear De-escalation Supported by China: Rapid War Maneuvers

• EU/US implement new sanctions, a show of force in a civilized form. China will support the West in rejecting violence.
• Russia will stop military actions. The economy is frozen, the political system will remain.

Economic consequences

• Delays in commodity supplies (oil, gas, nickel, aluminum, palladium, titanium, iron ore) will cause business disruption and delays
• The push for global economic growth
• Russia will enter a systemic financial crisis and economic recession (depth depends on the length of the war)
• Fiscal and monetary efforts will be bolder. ECB backs away from normalization
• The refugee crisis in Europe
• The new European military doctrine

Financial markets

• Pressure on the energy market remains
• Financial markets in uncharted waters (thanks to systemic threat in Russian markets)
• Escape to Quality (Safe Havens)
• The disconnection of some Russian banks from SWIFT will support the use of alternative channels, such as cryptocurrencies (Etherum and others)

The outcome of the conflict will take longer

Military activities at a standstill, Ukraine resists, Russian offensive drags on for months.

Prolonged fighting but low intensity conflict

Economic consequences

• Civilian and military casualties
• Disruption of global supply chains
• Growing public discontent in Russia
• Increasing sanctions against Russia
• The expansion of NATO, with the probable entry of the Nordic countries, will not lead to a direct military conflict
• Stagflation in Europe
• The ECB will essentially lose its independence. It will be forced to rethink its asset purchases (to support defense and energy transition costs) directly or indirectly

Financial markets

Fighting global stagflation: Central banks return to the fore with a controversial move on the long end of the yield curve and global financial conditions

• Battling global stagflation: Central banks return to controversial move at long end of yield curve and global financial conditions
• Real rates will remain in negative territory: after the correction, investors will focus on equities, loans and look for sources of real appreciation in Emerging Markets (EM)
• Search for safe liquid assets (cash, precious metals, etc.)

A long, high-intensity military conflict: let's expect the worst

• Possible use of nuclear weapons
• Global systemic threat, global stagflation, collapse of financial markets that will remain highly volatile

A period of war can justify strong financial repression. Real interest rates will remain deep in the deep negative.